What policies should the Conservatives Party start putting forward?

[The_Squid]

Here are the results of someone that currently makes the following incomes, with and without the above changes (this is just looking at Federal tax brackets):

Work Income ---- Current After Tax Income ---- New After Tax Income w/ Handout

0 -------------------------------- 0 ------------------------------------- 18k

20k -----------------------------17k ----------------------------------- 31k

40k -----------------------------34k ----------------------------------- 44k

60k -----------------------------50.1k -------------------------------- 56.5k

80k -----------------------------66k ----------------------------------- 68.9k

100k----------------------------81.4k -------------------------------- 81.1k

120k----------------------------96.2k -------------------------------- 93.1k

140k---------------------------- 111k -------------------------------- 105.2k

So basically everyone up to about 100k gets a bump due to the tax changes and handout, while those above are impacted by the higher top tax bracket. And yes the top tax bracket is a full 7% higher than now, you do have to pay for the expensive new entitlement. The component of provincial budgets currently going to various welfare/transfer programs would also be redirected to this program to pay for it.

Is the 7% higher top tax bracket, impacting people making over 100k, worth the benefit of essentially eliminating poverty? That's the real question to discuss, since appropriate changes in the tax structure maintain the monetary incentive to work.

Good explanation Bonam.

Edited January 25, 2016 by The_Squid

[TimG]

So basically everyone up to about 100k gets a bump due to the tax changes and handout, while those above are impacted by the higher top tax bracket. And yes the top tax bracket is a full 7% higher than now, you do have to pay for the expensive new entitlement.

You can eliminate EI and CPP contributions which would increase the take home pay of 200K+ by about $6000. In addition, such a move would have to be accompanied by a mass layoff of civil servants because of all the programs that will no longer need administration. If someone wants to argue that we still need the same number of civil servants then what is the point?

This biggest problem with this scheme is it would push the combined fed-prov income tax over to 60% which is high enough to trigger brain drain and tax evasion. I think this aspect of the problem makes it a non-starter.

Is the 7% higher top tax bracket, impacting people making over 100k, worth the benefit of essentially eliminating poverty? That's the real question to discuss, since appropriate changes in the tax structure maintain the monetary incentive to work.

Except it does not eliminate incompetence. There is a subset of the population that would spend that 18K on non-essentials like drugs, booze and gambling and still end on the street needing help. Nor would the 18K be enough to pay for rent in most major cities.

[Bonam]

You can eliminate EI and CPP contributions which would increase the take home pay of 200K+ by about $6000. In addition, such a move would have to be accompanied by a mass layoff of civil servants because of all the programs that will no longer need administration. If someone wants to argue that we still need the same number of civil servants then what is the point?

This biggest problem with this scheme is it would push the combined fed-prov income tax over to 60% which is high enough to trigger brain drain and tax evasion. I think this aspect of the problem makes it a non-starter.

Except it does not eliminate incompetence. There is a subset of the population that would spend that 18K on non-essentials like drugs, booze and gambling and still end on the street needing help. Nor would the 18K be enough to pay for rent in most major cities.

I agree, a top combined tax rate of 60% is problematic, and that's the biggest issue with a program like this. 60% is right around the max you find in some of the most progressive/socialist northern European countries, so it's not necessarily impossible but probably a non-starter in Canada and the US which are far more on the entrepreneurial rather than re-distributive end of the cultural spectrum.

As for incompetence... yes, there is that. But then at least if someone can't afford basic necessities we can rightfully look down on them and leave them to rot knowing they are getting $18k and wasting it, rather than just someone that just needs a helping hand up

Also, $1500/month is enough to live on even in places like Vancouver. You don't need to rent a nice condo on the west end, you can rent a room in someone's house or basement for as low as $500, just check Craigslist, there are hundreds of postings in the 500-700/mo range in all of Canada's major cities. Or, live with a roommate/partner that also gets their $18k, and you get $36k between the two of you, plenty to rent a very reasonable apartment in any major city.

Edited January 26, 2016 by Bonam

[Newfoundlander]

I haven't done a lot of research on the subject, though it does intrigue me, but my understanding is that it can be setup in a way that nobody would be worse off than they are now.

The fact that you can significantly shrink government is why the idea resonates with some conservatives.

[Smallc]

They could start by actually listening to what other people say:

http://www.huffingtonpost.ca/2016/01/27/rona-ambrose-justin-trudeau-pipeline_n_9089818.html

[Argus]

They could start by actually listening to what other people say:

http://www.huffingtonpost.ca/2016/01/27/rona-ambrose-justin-trudeau-pipeline_n_9089818.html

Maybe what they're saying isn't worth listening to.

http://news.nationalpost.com/news/canada/canadian-politics/michael-den-tandt-time-for-liberals-to-stop-the-platitudes-and-start-governing

[ReeferMadness]

I agree, a top combined tax rate of 60% is problematic, and that's the biggest issue with a program like this. 60% is right around the max you find in some of the most progressive/socialist northern European countries, so it's not necessarily impossible but probably a non-starter in Canada and the US which are far more on the entrepreneurial rather than re-distributive end of the cultural spectrum.

If you go back and look at historical tax rates (these are for US, I can't find others but they're probably representative), you will find that not only is 60% fairly low for a maximum marginal tax rate, but that during the years of maximum growth (the 50s and 60s) the marginal tax rates were highest. This should immediately dismiss the myth that higher taxes somehow impair economic activity.

[ReeferMadness]

Maybe what they're saying isn't worth listening to.

You can't suck and blow. If the Cons want to claim that the Liberals are or aren't saying something, then they need to pay attention.

[ReeferMadness]

Higher taxes. Guaranteed minimum income. LOL. Harper's head would be rotating if he saw what's being discussed in the way of policies for his Conservative party. LMAO.

[Bonam]

If you go back and look at historical tax rates (these are for US, I can't find others but they're probably representative), you will find that not only is 60% fairly low for a maximum marginal tax rate, but that during the years of maximum growth (the 50s and 60s) the marginal tax rates were highest. This should immediately dismiss the myth that higher taxes somehow impair economic activity.

The high top tax rates were WWI and WWII policies (necessary to fund the huge war effort), which in each case were steadily lowered again after the wars ended. As for the US's highest growth being in the 50s and 60s... yes, but not because of the tax rates, rather it was because of its unique economic positioning after the war (Europe was left in ruins and rebuilding, the Soviet Union was mired in Stalinist repression, and the "economic miracles" in Japan and China hadn't happened yet). As really the lone industrialized country (along with Canada and Australia I guess) that was left undamaged by the war and embracing a market economy, the US was basically guaranteed phenomenal growth regardless of the details of tax policy, since there was really nowhere else in the world you could do business in the same way until decades later.

The other thing to note is hardly anyone paid taxes at those rates. which can be seen since overall government revenues in the US have stayed remarkably constant at around 17-18% of GDP for the entire postwar period to the present day (see below). Paying for the guaranteed income program described above would increase the tax burden by about 6% of GDP, which is far outside the range the US has stayed within for over 70 years.

Edited January 27, 2016 by Bonam

[Bonam]

Personally, I'm really undecided about the guaranteed income thing.

On one hand, I really like the idea of eliminating dozens of individual means-tested welfare-type programs. This would eliminate a ton of government waste and bureaucracy, put a greater proportion of program money in the hands of intended recipients rather than government bureaucrats, and eliminate many of the ways in which government gives out privilege to specific groups rather than all citizens equally. In addition, it would likely significantly reduce poverty, crime, and health issues. It is also a potential answer to dwindling employment as a result of automation and globalization.

On the other hand, a new program costing 6% of GDP (closer to 10% of GDP in Canada) beyond current spending is absolutely huge and fundamentally alters the economic landscape, reduces tax-competitiveness relative to other countries, and probably impedes growth to some extent.

Edited January 27, 2016 by Bonam

[TimG]

On the other hand, a new program costing 6% of GDP (closer to 10% of GDP in Canada) beyond current spending is absolutely huge and fundamentally alters the economic landscape, reduces tax-competitiveness relative to other countries, and probably impedes growth to some extent.

I tried to calculate the potential savings (OAS, GIS, Welfare, EI et. al.) and came up with a figure of around $100 billion/year which if pretty close to the 6% of GDP. So it should be possible to lower tax brackets to ensure the after tax income was the same as before the plan.

Note that the vast majority of the savings come from eliminating OAS and GIS so as the population ages we may end up with GIA whether we plan to or not.

Edited January 28, 2016 by TimG

[Bonam]

I tried to calculate the potential savings (OAS, GIS, Welfare, EI et. al.) and came up with a figure of around $100 billion/year which if pretty close to the 6% of GDP. So it should be possible to lower tax brackets to ensure the after tax income was the same as before the plan.

Note that the vast majority of the savings come from eliminating OAS and GIS so as the population ages we may end up with GIA whether we plan to or not.

The 6% of GDP was for the US, for Canada it would be higher (since GDP per capita is lower while the poverty line is higher). The 6% also already included redirecting the funds from other programs that could be cancelled into the fund for this program.

In Canada, we're talking about 18k/year to 22 million people, which is $400 billion/year. Subtracting the $100 billion that can be saved by cancelling other programs, that's an extra $300 billion/year, or about 15% of GDP in extra spending (Canada's GDP is ~$2 trillion).

The Canadian federal government operating expenses are around $300 billion/year right now, the provinces sum to about $400 billion/year, cities are another $150 billion/year or so. That all adds up to $850 billion, or about 42% of GDP. So we're talking about increasing the overall size of Canadian government from 42% of GDP to 57% of GDP to pay for this program, barring any savings that might be achieved from reducing crime and health spending as a result of the program.

Edited January 28, 2016 by Bonam

[bush_cheney2004]

If you go back and look at historical tax rates (these are for US, I can't find others but they're probably representative), you will find that not only is 60% fairly low for a maximum marginal tax rate, but that during the years of maximum growth (the 50s and 60s) the marginal tax rates were highest. This should immediately dismiss the myth that higher taxes somehow impair economic activity.

Faulty reasoning as explained above, and certainly not applicable to Canada. It's is amazing that in 2016, one cannot easily find such data for historical tax rates in Canada, and so many other basic data.

[TimG]

In Canada, we're talking about 18k/year to 22 million people, which is $400 billion/year. Subtracting the $100 billion that can be saved by cancelling other programs, that's an extra $300 billion/year, or about 15% of GDP in extra spending (Canada's GDP is ~$2 trillion)

I think any $300 billion increase in spending on transfers to individuals would have the effect of reducing poverty. We could debate about the efficiency of different methods but the main consideration is the increase in spending.

If you want to evaluate GIA it should be done while maintaining existing social transfer spending levels. If that means the GIA drops to $5K/year then that tells us that the GIA sounds good but it is a very inefficient way to manage social transfers and the existing system may not be so bad.

Edited January 28, 2016 by TimG

[Bonam]

The 6% of GDP was for the US, for Canada it would be higher (since GDP per capita is lower while the poverty line is higher). The 6% also already included redirecting the funds from other programs that could be cancelled into the fund for this program.

In Canada, we're talking about 18k/year to 22 million people, which is $400 billion/year. Subtracting the $100 billion that can be saved by cancelling other programs, that's an extra $300 billion/year, or about 15% of GDP in extra spending (Canada's GDP is ~$2 trillion).

The Canadian federal government operating expenses are around $300 billion/year right now, the provinces sum to about $400 billion/year, cities are another $150 billion/year or so. That all adds up to $850 billion, or about 42% of GDP. So we're talking about increasing the overall size of Canadian government from 42% of GDP to 57% of GDP to pay for this program, barring any savings that might be achieved from reducing crime and health spending as a result of the program.

In the US, the equivalent program would be 220 million * 12k/year = 2.6 trillion/year, while 1.2 trillion of current programs could be cancelled, meaning additional expenditures of 1.4 trillion/year. That's about 7% of GDP. US GDP is $19 trillion, the federal government is $3.8 trillion (20%), states are $1.7 trillion (9%) and cities are also ~$1.7 trillion (9%). So the total size of US government is ~38% of GDP, and would have to increase to ~45% of GDP to implement this program.

Looking at the numbers above... the US could probably afford it, but Canada couldn't really... 57% of GDP is just too big of a government burden.

[Bonam]

I think any $300 billion increase in spending on transfers to individuals would have the effect of reducing poverty. We could debate about the efficiency of different methods but the main consideration is the increase in spending.

If you want to evaluate GIA it should be done while maintaining existing social transfer spending levels. If that means the GIA drops to $5K/year then that tells us that the GIA sounds good but it is a very inefficient way to manage social transfers and the existing system may not be so bad.

Yeah, a $5k GAI wouldn't do much and increasing government spending by $300 billion is implausible. As nice of an idea as it may seem, it doesn't look mathematically plausible in Canada at present.

[TimG]

Yeah, a $5k GAI wouldn't do much and increasing government spending by $300 billion is implausible. As nice of an idea as it may seem, it doesn't look mathematically plausible in Canada at present.

Perhaps a GIA is not such a great idea despite its elegance. I would argue the existing system of targeted transfers does more for people who need it than a flat income given to everyone when you keep spending the same. GIA only looks better than the current system if transfers are significantly increased. Edited January 28, 2016 by TimG

[Smallc]

Maybe what they're saying isn't worth listening to.

http://news.nationalpost.com/news/canada/canadian-politics/michael-den-tandt-time-for-liberals-to-stop-the-platitudes-and-start-governing

I don't really get the complaints in that article. The government has dealt with nearly 10% of their platform so far (and has another 15% in process). Up until this point, the house has sat for less than 3 weeks. There was a holiday break, and 5 international summits. What was he expecting, exactly?

[Argus]

I don't really get the complaints in that article. The government has dealt with nearly 10% of their platform so far (and has another 15% in process). Up until this point, the house has sat for less than 3 weeks. There was a holiday break, and 5 international summits. What was he expecting, exactly?

Answers to question rather than the sort of vague talking points the Liberals used to complain they got from the Tories.

[On Guard for Thee]

Answers to question rather than the sort of vague talking points the Liberals used to complain they got from the Tories.

You seem rather confused. The talking points were Harper's domain, and probably a lot of the reason Canadians showed him the door. Now we are actually getting answers.

[Smallc]

Answers to question rather than the sort of vague talking points the Liberals used to complain they got from the Tories.

Most of that, at this point, is because of the lack of a complete answer.

[Argus]

Most of that, at this point, is because of the lack of a complete answer.

The questions are usually "What are you doing to do?" They aren't answering either because they don't know, or because they don't want people to know. Trudeau's silly dance around pipelines is another attempt to straddle the fence. He will support pipelines as long as they're popular? Seriously!? That's a policy!?

[Smallc]

You can't railroad your own pipeline process by throwing your support behind something pre maturely. First, Trudeau says things without thinking. Then, he's taking too long to think. Only one criticism can be valid.

Governments need to communicate completed plans when they are finalized and they need to be evidence based.

[Argus]

Governments need to communicate completed plans when they are finalized and they need to be evidence based.

You mean like he'll support pipelines if they're popular?

http://news.nationalpost.com/full-comment/john-robson-on-pipelines-ottawa-decides-not-to-decide